Make us your home page
Instagram

Retail real estate: As good as it gets

Today's tepid growth could be as good as it gets for developers and landlords of retail real estate.

"Normally the economy recovers in three or four years," said William Keaney, managing director of CIT Retail Finance, one of the nation's larger lenders to retail chains. "But this time there are headwinds to keep the consumer from bailing out the economy."

That's what a panel of high powered retail finance experts Tuesday told the Turnaround Management Association, a trade group of 250 Florida firms that specialize in distressed debt, liquidations and bankruptcy proceedings.

The shopping center vacancy rate has stabilized at a less-than-healthy 10 percent and rents are down a third from a boom time peak in 2007.

Now add a changed consumer to the mix. Lack of income growth, rising food and gas prices and the prospect of higher interest rates when the Federal Reserve eases off the gas pedal all promise to keep retail spending growth in check.

Meantime online retail sales are growing at 10 percent a year, triple the rate of sales growth in brick and mortar stores, noted Lee Diercks, a partner in Clear Thinking, a consulting firm that has advised retailers like J.C. Penney Co.

While massive store closings appear over for now, retailers are trimming their ranks more than in normal times. Major retail bankruptcies are way down (18 in 2011 versus 32 in 2009) not because business is better, but because new rules governing Chapter 11 filings made it harder for retailers to get financing to emerge from a reorganization.

Other panel insights:

• The most widespread new strategy is shrinking the size of stores to bolster profitability. Macy's, Kohl's, DSW, Office Depot, Walmart and Target lead the list.

"Landlords will have to get very creative to slice and dice all the leftover space," said Spencer Mehl, senior vice president of RCS Real Estate Advisors which counts McDonald's and Disney Stores as clients. "This comes when the country is so seriously over-stored we have joked about creating a team of arsonists."

• Eyes are riveted to struggling Sears, which also owns Kmart. The retail giant this month decided to drop apparel to downsize some of its mall stores while trying to raise billions of dollars selling the real estate it owns in most of the dominant regional malls in the country.

• There may be fewer store closings overall, but pressure is building for more chains to trim their ranks including any chain competing with strong online rivals. The list includes Barnes & Noble, Books-a-Million, Gap, Coldwater Creek, Steinmart, Dillard's, Pac-Sun, Burger King, Denny's, Foot Locker, Regal Entertainment and AMC Theaters.

• The growth vehicles of the 1990s like Best Buy and Sports Authority, which carry the widest selection for specific interest groups, are a threatened species. One Apple store, for instance, generates eight times the sales productivity of a Best Buy in a seventh of the space, yet only sells five basic product lines.

"The big box store model is broken," said Morton Mucey, vice president of SB Capital, a financial arm of the Schottenstein family that launched American Eagle Outfitters and DSW.

Mark Albright can be reached at albright@tampabay.com or (727) 893-8252.

Retail real estate: As good as it gets 03/27/12 [Last modified: Tuesday, March 27, 2012 9:40pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Tampa is 15th-most popular city to move to with U-Haul

    Markets

    TAMPA —Tampa is undoubtedly a destination point, at least according to U-Haul.

    Tampa is the No. 15 destination for people moving with U-Haul trucks. | Times file photo
  2. Florida's economy growing faster than other big states and far better than U.S. overall

    Business

    When it comes to economic growth, Florida's running alongside the leading states and well ahead of the United States as a whole.

  3. Westshore Marina District project takes shape with another acquisition

    Real Estate

    TAMPA — One of Tampa Bay's prime waterfront areas took another major step toward redevelopment Friday as WCI Communities bought 2.35 acres in Westshore Marina District.

    WCI Communities, Lennar's high-end subsidiary,has paid $2.5 million for 2.35 acres in the Westshore Marina District for 35 townhomes. WCI is under contract  to buy an additional 9.5 acres.
[BTI Partners]
  4. Posh Guy Harvey RV park to open in Tampa Bay with $250,000 cottages

    Business

    HOLIDAY — Love those Guy Harvey T-shirts with the soaring marlins? In the not too distant future, you might be able to kick back in your own Guy Harvey cottage in the first-ever Guy Harvey RV park.

    Renderings of the clubhouse and an RV cottage site of the planned Guy Harvey Outpost Club & Resort Tarpon Springs.
[Guy Harvey Outpost Collection]
  5. Port Tampa Bay secures $9 million grant to deepen Big Bend Channel

    Business

    Port Tampa Bay has secured a $9 million grant from the U.S. Army Corps of Engineers for the widening and deepening of the Big Bend Channel in southern Hillsborough County.